Improved UK Wage Growth Boosts Pound

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  • Weaker Business Confidence Dampens AUD Exchange Rates – Improved wage price index to shore up Australian Dollar
  • Pound Benefits as UK Wage Growth Picks Up – GBP vulnerable ahead of latest UK inflation data
  • US Dollar Under Pressure After Small Business Optimism Disappoints – Gains in store on rising consumer price index
  • Negative German Business Confidence Dents Euro – Weaker third quarter gross domestic product could encourage fresh selling

Softening Business Confidence Limits Australian Dollar Strength

AUD exchange rates came under fresh pressure as October’s NAB business confidence index weakened from 6 to 4. This latest decline in sentiment weighed heavily on the appeal of the Australian Dollar, even as the weekly ANZ Roy Morgan consumer confidence index strengthened. With the outlook of the Australian economy still looking rather bearish there was little incentive for investors to buy into the ‘Aussie’ yesterday, even as hopes of an easing in US-China trade tensions picked up.

The mood towards the Australian Dollar could improve this morning, however, if the third quarter wage price index strengthens as forecast.

Stronger UK Earnings Encourage Pound Demand

The Pound pushed higher across the board after the latest UK weekly earnings excluding bonuses data strengthened further than forecast. With earnings accelerating 3.2% on the year in the three months to September this encouraged bets that wage growth will pick up further. Although the corresponding unemployment rate showed a surprise increase to 4.1% this was not enough to dent demand for Sterling yesterday. Speculation over the possibility of an imminent Brexit agreement also shored up GBP exchange rates.

Tonight’s UK consumer price index data may knock some of the wind out of the Pound’s sails if inflation picks up.

Improved German Economic Sentiment Fails to Boost Euro

A modest improvement in the German ZEW economic sentiment index was not enough to give the Euro any boost. Even though the index picked up from -24.7 to -24.1 this still signals a distinctly negative outlook. Worries over the Italian budget dispute put additional pressure on EUR exchange rates, meanwhile, as investors braced for the European Commission’s resubmission deadline. As the Italian government continued to stick by its controversial budget deficit target this limited the appeal of the single currency.

As forecasts point towards a slowdown in the third quarter German gross domestic product EUR exchange rates look set to remain on a downtrend today.

Underwhelming Business Optimism Weighs on USD

October’s NFIB small business optimism index proved disappointing, dipping from 107.9 to 107.4 on the month. This weaker reading helped to put the US Dollar under pressure overnight, with investors jittery ahead of the latest US monthly budget statement. With markets increasingly concerned by the wideness of the US deficit the mood of USD exchange rates turned bearish, even as Federal Reserve policymakers continued to point towards a December interest rate hike.

Any increase in tonight’s US consumer price index data could encourage the US Dollar to return to a stronger footing against its rivals.

Sharp Oil Price Slump Drags Canadian Dollar Down

In an abrupt change of fortune oil prices slumped dramatically to multi-month lows after Trump attacked OPEC’s plans to curb production. With the US looking likely to increase its own output in the face of reduced Saudi production worries over the prospect of another oversupply glut increased. This left the commodity-correlated Canadian Dollar on a weaker footing last night as Brent crude dropped -3.95% on the day’s opening level.

Unless US crude inventories data impresses CAD exchange rates may remain under pressure in the days ahead.

New Zealand Dollar Shrugs Off Weaker Food Price Index

Disappointingly, October’s New Zealand food prices index showed a fresh contraction of -0.6% on the month. While this points towards weaker inflationary pressure, though, the New Zealand Dollar was able to hold onto a stronger footing against many of the majors. With the US Dollar falling out of favour NZD exchange rates benefitted from an increased sense of market risk appetite yesterday.

As long as investors continue to see reason to bet on improved US-China trade relations the New Zealand Dollar should hold onto its gains.

Data Released

November 14th 11:30 AUD Wage Price Index (YoY) (3Q) 2.3%
November 14th 18:00 EUR German Gross Domestic Product (YoY) (3Q) 1.3%
November 14th 20:30 GBP Consumer Price Index (YoY) (OCT) 2.5%
November 15th 00:30 USD Consumer Price Index (YoY) (OCT) 2.5%

Post by TorFX

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